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All eyes to CPI basket as stocks continue their run

THE Australian market is expected to rise on Monday with inflation figures the focus of this week. The ASX 24, the March share price index futures contract, indicates the market will open 17 points higher at 4757.

CommSec economist Craig James said the market's focus this week would be on the Australian consumer price index (CPI) and inflation figures, which would be released on Wednesday.

Inflation was expected to be fairly benign, with the underlying rate predicted to rise 0.6 percentage points to about 2.5 per cent. A subdued performance on inflation will be critical to whether the RBA will have room to cut interest rates again.

''Because inflation is under control that leaves the door open for rate cuts should they become necessary. But given the optimism we're seeing globally, the potential for improvement here domestically, the Reserve Bank is probably going to remain on the interest rate sidelines,'' Mr James said.

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In the US on Friday the S&P 500 and the Dow hit their highest levels since late 2007, helped by news that Republicans might agree to raise the debt ceiling. But poor earnings from Intel pulled the Nasdaq lower.

European share trading posted mixed results on Friday, with London gaining on Chinese growth data that beat expectations, while Frankfurt and Paris slipped back on disappointing European and US figures.

Mr James said the local market would be watching results from the US earnings season this week. There could be some profit taking during the week as investors took advantage of the local market's steady improvement over the past few months, he said.

''As our market continues to rise you're going to get people wanting to take profits regularly,'' he said.

Indeed, AMP head of investment strategy Shane Oliver cautioned that the Australian market was vulnerable to a short-term correction, having gained about 10 per cent since mid-November. ''Notwithstanding the risk of a short-term correction, shares are likely to head much higher this year. The global growth outlook is improving, led by China and the US,'' he said.